International Telecommunication Union HIPSSA Project Support for Harmonization of the ICT Policies in Sub-Sahara Africa The CRASA/SADC Experience: The.

InternationalTelecommunicationUnion

HIPSSA Project

Support for Harmonization of the ICT Policies in Sub-Sahara Africa

The CRASA/SADC Experience: The Potential OptionsSESSION 3

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Overview

Fund Context and Fund Relevance in Converged Environment

Practices and experiences by stakehoders

Regional and international best practices

Approaches to USAF Management

Discussion/ Q & A

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Overview

Fund Context and Fund Relevance in Converged Environment

Practices and experiences by all stakehoders

Regional and international best practices

Approaches to USAF Management

Discussion/ Q & A

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First USAFs were established in South America in the mid 1990’s;

Funds are more prevalent in developing countries; only 9 Funds are operational in Europe and the Americas (only Australia, USA, Canada, France, Italy, Czech Republic, Bulgaria, South Korea and Oman).

Alternative forms of public funding are used in many countries (Equity participation, PPP, Incentives)

Fund Context - Global

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SADC region - first Fund was established (in law) in 1997 in South Africa.

Today, 9 SADC countries have established Funds in law. 8 have money in the Fund received through either seed

funding from donors or government, levies from operators, or surplus Funds from regulator.

Of these 6 have undergone processes (competitive bidding, tender processes, or other means) to identify projects and disburse monies to assist in the implementation of such projects.

Fund Context - SADC

Setting up a USAF

Best established in a liberalized market: Clear institutional framework for the Fund Clear, pro-competitive licensing regime Fair interconnection regime A framework for infrastructure sharing and facility leasing; Effective and efficient spectrum management regime; and Harmonization with regional and global approaches and

standards

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Guidelines and other SADC Policy Documents deal with this extensively

Fund Management The Ministry A division of the regulator A separate agency An independent third party

Fund Must have (at a minimum):

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Reporting Procedures.

Full time Fund Administrator

Separate Board of Trustees

Own Bank Account

Fund Management (2) Accountability: Transparency & Trust Efficiency

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Toolkit provides some recommendations (with accompanying examples)

• Separate accounting• Operating procedures• Governance framework• Annual report & auditing

USAF Funding Variety of sources:

Government general budget, Levy imposed on industry, as a percentage of annual

revenue (SADC, ranges from 0.02% to 6%) Regulatory sources such as the proceeds of license

competitions, frequency spectrum auctions and fees. Once-only contributions from government Consumers

Level of funding:

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Policy Driven Market

Driven

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Overview

Fund Context and Fund Relevance in Converged Environment

Practices and experiences by all stakehoders

Regional and international best practices

Approaches to USAF Management

Discussion/ Q & A

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Global Situation

In the period 1998-2006, only 26 percent of USAF funds collected globally had been redistributed to the ICT sector for use on universal access projects!

Regulatel, in Latin America (2006), found that: in the 13 Latin American countries with Funds, the amounts

collected ranged from $1 million in Ecuador to $1,8 billion in Brazil. of the 13 countries, 6 of them had not disbursed any of the monies

in the Fund, of the 13 countries 4 had disbursed less than 45 percent, and 3

particularly effective funds in Chile, Mexico and Paraguay had spent over 95 percent of the money collected.

Financing of Projects: Utilization of Funds (Challenges)

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Non Disbursement or Slow Funding:

• Fund is located with the regulator (not prioritised)• Speed of the political process, governments fail to pass enabling

legislation, or hold back approvals for funds to be spent• Significant time needed to design, evaluate and assess and

implement projects• Projects often considered ‘public investments’ & subject to

lengthy approval processes• Disbursements may be subject to additional constraints from

third party organizations such as donors

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Fund Risks

The most commonly identified risks facing publically funded projects include: Implementation of projects that distort the market; Creating dependence on ongoing funding; Potential abuse of funds; Favoritism; and Project failures which waste resources.

Source: http://www.ictregulationtoolkit.org/en/Section.3296.html

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Fund “Horror Stories” Examples exist of Funds (in SADC) that have:

been established in law but are still not operational as many as 5 years later;

determined levies, over-collected and under-spent; overspent, i.e. provided subsides for unsuccessful projects,

or for inefficient use in projects; become involved in project implementation, through

rolling out telecentres and in some cases networks; initiated projects but have not been able to coordinate

them amongst different levels of government and different affected government departments (e.g. education, infrastructure, health)

not made their collections, and disbursements public on a periodic basis;

Financing of Projects: Utilization of Funds (Opportunities)

Best practice: Legal framework encourage efficiency & transparency & enable

speedy Fund disbursement Fund should be given sufficient autonomy to disburse funds A clear Delegation of Authority Framework should exist across the

organization Fund should have clear continuous and ex post reporting

requirements Funds should have a maximum amount that can be rolled over

from one year to another without eliciting a review of the USAF contributions

Only collect money when structure in place to disburse

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…Other Types of US/UA Financing

Ownership or Equity Participation Government plays a direct roll in terms the rollout of

infrastructure; Brazil, Malaysia and South Africa

Public Private Partnerships PPPs have begun to include more than just networks and

government, but include equipment suppliers, vendors, manufacturers, civil society and communities

Infrastructure deployment projects in Australia, Thailand, Kenya and Tanzania

Provision of financial incentives and subsidies USAF subsidies Grants and loans from government departments (non-USAF) Latin American countries through the use of USAFs, Japan,

the USA and EU through broadband stimulus packages.

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Overview

Fund Context and Fund Relevance in Converged Environment

Practices and Experiences by all stakehoders

Regional and international best practices

Approaches to USAF Management

Discussion/ Q & A

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Outcomes Based Aid

Outcomes Based Aid Principles Benefits of Outcomes Based Aid Link payments to delivery Ensure that the subsidy is linked to

specific measurable targets Contract services out to a third party

which receives a subsidy to meet the stated objectives

The Fund pre-finances the project (in tranches) until delivery

Subsidies must be performance based – payment is made only after services are rendered and audited

Transparency increases efficiency and effectiveness

Performance risk is carried by the provider (recipient of funding) and accountability is increased

The subsidy (and possibly subsidy award mechanism) incentivize the private sector

Results can be tracked through a focus on outputs/ results

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Fund Management Process

Policy and Legislative Framework

Ugandan Example

Implementation

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Remember….

Badly designed projects and programmes will result in ineffective project implementation, and in some cases a waste of human and

financial resources.

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Programmes precede Projects In SADC although countries

have polices and Funds, not all countries have established programmes. Absence of programmes affects

rollout strategy, and decision making

Countries with identified UAS programmes include Malawi, South Africa and Zambia. USA Pakistan Nigeria Uganda

Nigeria1. Universal Access Programme2. Universal Coverage

Programme3. Universal Service

Programme 4. ICT for Development

Programme (incl apps, content)

USA1. High-Cost program 2. Lifeline (low income)

program3. Schools & Libraries (“E-rate”)4. Rural Health Care program

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Project Types

User needs : institutions (e.g.

schools and clinics) & targeted population groups

such as people with disabilities, low income users and the elderly.

Projects addressing

infrastructure gaps in high costs areas

which typically include rural and

remote areas.

Historical focus on Infrastructure

projects in most African countries

With Broadband increased focus on User Needs to drive

demand

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Projects should be Targeted

Information that will assist in the establishment of targets:Baseline data indicating the situation at the beginning of project implementation. When such data is not available, the project should include an activity to collect it from the start.Historical trends in the indicator value over time. What pattern of change has been evident in the past? Is this pattern likely to continue?Stakeholders’ expectations of progress. Exploring the achievement expectations of all of the partners, as well as the beneficiaries will assist in providing a realistic idea of what can be achieved.Universal Access Expert judgments and research findings. Experts knowledgeable about the programme sector and local conditions as well as research findings are other useful sources of information for target setting.Accomplishments of similar programmes (and projects). Information on what is being done under similar conditions by other agencies and organizations who have a reputation for high performance.

[1] Adapted from USAID, TIPS Report, 1997

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Start with an Exit Strategy

Sustainability is frequently linked to the challenge of financing a project

Make a meaningful, preferably once off intervention to stimulate ICT sector development (“smart subsidy”)

When you start a project, it should at the same time have "an exit strategy" or a means to wind down the financial support after a certain period of time

From the beginning there should be clarity on: What the targets are (financial and developmental) When the funder intends to exit/pull out of the project What mechanisms are in place to ensure sustainability?

How will the project fund itself in the long term?

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Different Projects, Different Costs

Different projects will have different costs and cost structures and thus different financing mechanisms…

E.g. infrastructure vs. e-rate vs. computer labs Some dependencies for cost assumptions:

Country Project Technology deployment choices Revenue estimates

No “one-size fits all” solutions

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Infrastructure Projects

Infrastructure Projects Funder: Private funding, Public Funding Models

including Ownership, Financing Incentives (including USAF), and PPPs (national, local, municipal) 

Funding: Subsidies, grants, loans, guarantees

Last Mile Access - Municipal and Local Authority Networks Funder: Private funding, Public Funding Models

including Ownership, Financing Incentives (including USAF), and PPPs (local, municipal)

Funding: Subsidies, grants, loans, guarantees, users/community access

India – Infrastructure

sharing incentives for

US/UA projects, aligning with regulatory framework

India- linking Funding to Regulations Indian Universal Service Obligation Fund (USOF).

Infrastructure that is rolled out using money from the Fund must be built on an open access basis as long as it is technically feasible. This ensures

competition in the universal service area, and other operators are able to share their funded

infrastructure thus deriving maximum benefit for the funder

at least 70% of the subsidized bandwidth capacity, created under the scheme, to be shared with the licensed service providers in the area (ASSAM) at a rate not more than 22% of the current TRAI ceiling tariffs

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School Connectivity Funder: Private funding, Public Funding Models including

Financing Incentives (including USAF), and PPPs (national, local, municipal, NGO, donor,etc) 

Funding: Subsidies, in-kind contributions, grants and loans, community access/user revenues

School Connectivity programmes developed in many countries including using a combination of license obligations USF financing, and PPPs, these countries include: Ecuador (specific programme), Pakistan (linked to successful

bidding/funding). Ireland (National School’s Plan) United States (e-rate, specific programme)

Some of Funds include specific provisions for school connectivity in their mandates.

Pakistan – School Connectivity (Indirect)

Pakistan’s USF does not fund schools directly, but has effectively aligned its infrastructure financing programme to the financing of school connectivity.

successful bidder is given obligations regarding connecting educational institutions and communities.

obligation to provide each higher secondary school, college and library in the area covered with the subsidy free connection, free broadband access for the first year, 5 PCs in a Local Area Network and the training of 2 trainers.

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(http://www.itu.int/ITU-D/asp/CMS/Events/2010/ThailandBroadband/Session4_Parvez_Iftikhar.pdf

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Content and Applications

In line with definitions of universal service and access that include “advanced services,” “Internet,” “broadband”

Financing of content and applications can include funding: Local content production User friendly and graphics based interfaces Local content in local languages Shared content (e.g. tourism, education, e-government)

that is locally relevant, where possible to a community level

Kenya – Funding “Demand” Kenya ICT Board (KICTB) Universal Service Fund managed by the CCK Examples:

Digital Villages in rural area - promote Internet connectivity to enable citizens to access government and commercially generated information available on the web (2009 “Pilot Pasha Centres”)

Nationwide training of 1000 people in business management, entrepreneurship, marketing, basic accounting and technical management (a “starter-kit”) to prepare potential Pasha Centre managers to run their centres

Taanda – digital content grants (Round 1- 2010), $4 million three-year grant program to support the development of local digital content. Grantees are selected through a Call for Proposal announced annually in June/July.

Laptop discounts for university students

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Conclusion

Many types of programmes and projects possible – must be tailored to national needs

For good Fund management Make sure the Fund Context is correct Make your Fund isrelevant in a converged environment

and a broadband world Design relevant and targeted programmes and projects

suited to the national needs, th gap being addressed and the project type

Monitor and Evaluate

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Thank You!

Q & A?

Mandla MsimangManaging Director, Pygma Consulting (South Africa)

[email protected]

Tel: +2711 7831210

www.pygmaconsulting.com